Europe phenol market anxious about benzene spot price developments

LONDON (ICIS)--The European phenol market is very concerned about the sharp increase in the price of benzene feedstock so close to the June contract price settlement, market sources said on Friday.

May benzene spot traded at $1,400/tonne (€1,120/tonne) CIF (cost, insurance and freight) ARA (Amsterdam, Rotterdam, Antwerp) on 24 May. This is an increase of €172/tonne over the May benzene contract price which settled at €948/tonne

The European benzene contract price is agreed on the final working day of the month and is based on spot trading activity in the days leading up to this.

Across the phenol market, concerns have been raised about a potential increase ahead of what looks set to be a slow month for many downstream derivatives in Europe.

These concerns are further enhanced by the wide spread in the price of benzene in Europe versus Asia.

Many European derivatives in the phenol chain are exported to Asia and exports have already been under pressure because of weakness in the key China market. But lower benzene costs in Asia will further compound this pressure and imports of products such as bisphenol A (BPA) and epoxy resins are already being offered in Europe.

“Benzene is making no sense,” a major bisphenol A (BPA) maker said in relation to rising benzene spot prices in Europe. “Look at the European spot price and the Asia spot price, the gap is too wide and we are exporting a lot of our product to Asia.”

Benzene spot prices in Asia are currently $1,075-1,100/tonne FOB (free on board) Korean, marking a spread of $200/tonne with European spot numbers.

Spot BPA in Europe is currently valued at €1450/tonne FD (free delivered) NWE (northwest Europe), while product in Asia is valued at a euro equivalent of €1,324/tonne CFR (cost and freight rate) Northeast Asia.

Another buyer of phenol described the recent price development in spot benzene and the hazards this might bring for June as “a disaster”.

“The situation today is a disaster and it was not so bright before. We may have to review our situation in June and July and cut production and I am not talking five or ten percent,” the phenol buyer said.

“The situation is getting very serious,” he concluded.

Producers of phenol are just as concerned about the recent developments in benzene feedstock.

“We don’t know what will happen. We need to buy between 29-30 June and if I would have forecast this I would have bought a week ago,” one producer said.

Meanwhile rumours of benzene production problems are rife across the European aromatics complex, although none of these have been confirmed. Major benzene producers do not disclose production issues.